The banking regulator has increased the farm loan disbursement target this year by 5.5 percent to bring more farmers into the banking system.

The central bank has raised the farm loan disbursement target by 5.5 percent to Tk 16,400 crore for the current fiscal year compared to the target last year.

Bangladesh Bank Governor Atiur Rahman announced the target while unveiling the agriculture and rural credit policy for 2015-16 at a meeting at his office in Dhaka yesterday.

Nine new banks that started operations in 2013 have to disburse at least 5 percent of their total loans to the farm sector this fiscal year, which is 2.5 percent for private and foreign banks.

The disbursement target has been set at Tk 9,290 crore for state-owned and specialised banks and at Tk 7,110 crore for private and foreign banks.

“We have to increase farm and rural credit and bring farmers into the banking system,” Rahman told chief executives of banks at the meeting.

The governor asked the bankers to encourage cultivation of import-substitute crops.

He also reminded the bankers that the 10-taka bank accounts for farmers were not introduced to disburse subsidies only. “These accounts must be run like any other bank accounts,” he said.

If any bank fails to attain the disbursement target at the end of the fiscal year, it has to deposit an amount equivalent to the unattained portion compulsorily to the BB without any interest.

The central bank set a Tk 15,550-crore agriculture loan target for fiscal 2014-15, but disbursement surpassed the target and stood at Tk 15,978.46 crore.

But the target of Tk 95.5 crore meant for import-substitute crops could not be reached as only Tk 82 crore was disbursed.

A total of 31.94 lakh farmers received agriculture and rural credit in the immediate past fiscal year.

Of them, 25.43 lakh were small and marginal farmers who got Tk 11,203 crore or 70 percent of the total loans, while 2.56 lakh sharecroppers got Tk 914 crore and 2.66 lakh women received Tk 901 crore.

The recovery rate has been stagnant at around 70 percent for the last few years, according to BB data.

The banking regulator last year cut the interest rate for farm loans by 2 percentage points to 11 percent to encourage farmers to take bank loans.

Overall farm production increased to 4.5 crore tonnes now from 1.1 crore tonnes 40 years ago.